Category: News and Events

Growth is a good problem to have. When you’re winning new contracts, experiencing rising revenue, and growing a team, everything looks like it’s moving in the right direction. On paper, that is.

From a CPA’s perspective, however, rapid growth is one of the most common reasons Pennsylvania business owners are caught off guard by unexpected tax bills and cash-flow strain.

The issue isn’t growth itself. It’s how quickly the rules change when your numbers do.

Why Growth Can Tighten Cash Flow

One of the biggest misconceptions we see is simple: more revenue automatically means more available cash. In reality, fast growth often reduces short-term cash flexibility, even when profits increase.

Why?

Taxes scale quickly. As income rises, so do federal and Pennsylvania estimated tax payments. Payroll taxes grow with each new hire. Additional local earned income tax filings or Local Services Tax obligations may be triggered if your business expands into new municipalities. Without early planning, those changes often show up as a surprise notice or a much larger than expected tax payment.

Timing matters. Revenue is taxed when it’s earned, not when cash is collected. If receivables lag while payroll, rent, and vendor expenses rise, cash can feel tight during your most successful months.

Spending accelerates before strategy adjusts. Growth often requires quick decisions: hiring staff, purchasing equipment, upgrading technology, or outsourcing services. How those costs are treated for tax purposes (deducted, capitalized, or depreciated) has a direct impact on taxable income.

Your structure may no longer fit. An entity set-up or owner compensation strategy that worked at lower revenue levels may be inefficient as profits grow. Retirement contributions, pass-through income planning, and payroll strategy often need to be revisited sooner than expected.

None of this means something is wrong. It simply means your financial picture has changed and your tax strategy needs to change with it.

When Business Owners Usually Call Their CPA

Many business owners reach out only after growth has already happened, when:

• A larger-than-expected tax bill arrives
• Cash feels tighter despite strong sales
• Estimated payments jump unexpectedly
• A lender or investor asks for financial clarity

At that point, the CPA’s role becomes reactive instead of strategic. While issues can still be addressed, opportunities around timing deductions, payroll strategy, or estimated tax planning may already be limited.

 Call Your CPA Before You Commit

A short CPA conversation before a major growth decision can prevent months of stress later.

Early input matters most when:

• A new contract significantly increases revenue: especially if payment timing changes
• You’re hiring multiple employees or contractors: triggering higher payroll taxes, PA unemployment contributions, and affecting classification considerations
• You expand into new municipalities or states: which can create new tax filing and compliance requirements
• You’re purchasing major equipment or software: where tax treatment affects income more than expected
• Growth follows several lean years: when prior losses or credits may still be leveraged with proper planning

A brief planning discussion at this stage often saves far more than it costs.

What CPA Growth Planning Actually Covers

 From the CPA side, planning isn’t about slowing growth. It’s about removing friction. That planning often includes:

• Adjusting federal and Pennsylvania estimated tax payments
• Forecasting cash flow with taxes included
• Reviewing entity structure and owner compensation
• Coordinating payroll, benefits, and retirement contributions
• Identifying deductions and credits tied to expansion
• Ensuring financial reporting aligns with lender or investor expectations

The goal is predictability, not perfection.

 Growth Is Easier When Taxes Aren’t A Surprise

Fast growth should feel exciting, not stressful. The businesses that navigate it most smoothly are the ones that involve their CPA early and treat tax planning as part of growth planning.

Growth changes your numbers. A proactive CPA helps make sure it doesn’t change your sleep.

Planning for Growth? Talk It Through

 If your business is growing quickly, or preparing to sign a major new contract, a short planning conversation can help clarify the tax and cash-flow implications before they become problems.

Our CPA team here at Canon Capital Management Group works with business owners to align tax strategy, cash flow, and growth decisions so success doesn’t come with surprises.

Have questions? We’re happy to talk. Contact us online or call 215-723-4881.

Kent Gerhart has retired from his role as Director of Technologies after more than 35 years in the technology field and over two decades with Canon Capital Management Group. Since joining us in November 2000, Kent has been a steady presence behind the growth of our technology division, helping clients adapt as systems, security, and infrastructure evolved over the years. His career spans roles as a programmer, analyst, and consultant, as well as ownership of KenTech Information Systems, Inc., an experience that shaped his practical, client-first approach.

As he enters retirement, Kent is looking forward to a new and meaningful role as a part-time caretaker for his first grandchild while continuing to work part-time in his custom woodworking business.

Brent Snyder has been named our new Director of Technologies. He joined Canon Capital Management Group in October 2024, bringing more than 25 years of experience in technology and operations. Brent holds a B.A. from Temple University and is a graduate of the Fox School of Business. Brent continues to demonstrate the strong leadership, operational expertise, and customer-focused approach that our clients have come to expect.

Brent is active in the local community, serving on the boards of Harleysville Baseball and #IronDad23, a nonprofit supporting families in the Souderton Area School District. He lives in Souderton with his wife, Laurie, and their two sons.

We thank Kent Gerhart for his lasting contributions and look forward to continued growth and innovation under Brent Snyder’s leadership.

For many businesses, independent contractors remain an important part of the workforce. As we move into 2026, the rules themselves aren’t brand new but enforcement, reporting expectations, and misconceptions continue to trip up otherwise well-run companies. That’s where a strong payroll partner can make a meaningful difference.

When payroll is involved early and consistently, contractor compliance becomes a managed process rather than a year-end scramble.

Misclassification is still the biggest risk

Federal agencies continue to pay close attention to worker misclassification because it directly impacts payroll taxes, wage laws, and benefits eligibility. While business owners may think of classification as a legal or HR issue, payroll often sits at the center of the practical realities: how workers are paid, how often, and under what conditions.

From the payroll side, our role is to help clients pause before defaulting to a 1099 designation. We look at factors such as behavioral control, financial independence, and the overall nature of the working relationship. While payroll providers don’t “decide” classification in isolation, we help surface red flags early, before they become IRS or Department of Labor problems.

Threshold changes don’t eliminate responsibility

One notable change affecting 2026 reporting is the increased dollar threshold for certain 1099 filings, which rose from $600 to $2,000 for payments made after 2025. While that may reduce the number of forms issued, it does not reduce the importance of tracking contractor payments accurately throughout the year.

This is where payroll support matters. Even if a contractor ultimately falls below the reporting threshold, businesses still need proper documentation on file, including a completed W-9, accurate tax identification details, and clear payment categorization. Payroll systems are designed to track this information consistently, rather than relying on spreadsheets or memory in January.

Clearing up common misconceptions

Even in 2026, we continue to see a few persistent misunderstandings:

• “Payroll only handles employees.” In reality, our payroll teams manage contractor payments, W-9 collection, and year-end reporting.
• “If my bookkeeper paid them, payroll doesn’t need to know.” Fragmented systems increase risk. Contractor payments should be visible and coordinated across accounting and payroll.
• “1099s are just a form we file at year-end.” By the time January arrives, any missing W-9s or classification issues are already problems.

A proactive payroll approach

When payroll is integrated into contractor management, businesses benefit from standardized onboarding, cleaner records, and fewer surprises. Our goal is to handle as much of the administrative burden as possible, so business owners can focus on operations, not compliance anxiety.

If you’re entering 2026 with a growing mix of employees and contractors, now is the right time to review how payroll supports that structure. A small adjustment today can prevent costly corrections later.

Our team recently came together for our third annual Pack-a-Shoebox Party in support of Operation Christmas Child. What started as a simple goal turned into a meaningful team effort, resulting in 64 packed shoeboxes ready to be delivered to children around the world.

Each box was filled with carefully chosen items—from small toys to school and hygiene essentials—intended to bring comfort, joy, and a reminder that someone, somewhere, cares.

What makes this effort special isn’t just the number of boxes, but the spirit behind them. It’s a reflection of our team’s willingness to pause during a busy season and focus on something beyond our day-to-day work.

We’re proud to continue this annual tradition and grateful to everyone who helped make it happen. Together, small actions added up to something truly meaningful.

The IRS and U.S. Department of the Treasury have released official guidance clarifying how tips and overtime compensation will be treated for tax year 2025. While the changes primarily impact individual tax returns, employers should understand what, if anything, changes from a payroll perspective.

The Basics

Beginning in 2025, eligible individuals may claim:

• A Qualified Tips Deduction of up to $25,000
• A Qualified Overtime Deduction of up to $12,500 (for overtime pay above an employee’s regular rate)

These deductions are claimed by employees when they file their personal tax returns. They do not change how payroll is processed.

What Employers Need to Know

•  No new payroll reporting requirements for 2025
• No changes to W-2 or withholding rules for tips or overtime this year
• Employers are not required to separately track or report “qualified” tips or overtime in 2025

Employees will determine eligibility and calculate these deductions when they file their individual returns using IRS guidance and their pay records.

What This Doesn’t Change

• Gross wages are still taxable and reportable as usual
• Employers must continue to withhold and remit payroll taxes on tips and overtime
• Overtime calculations, tip reporting, and payroll compliance rules remain the same

Looking Ahead

The IRS has indicated that updated reporting requirements may apply in future tax years, possibly starting in 2026. We’re monitoring developments closely and will communicate any changes that impact payroll processing.

How We’re Supporting You

As your payroll partner, we’ll continue to ensure your payroll is processed accurately and in compliance while keeping you informed of regulatory changes that affect your business and your employees.

As always, please contact us with any questions.

A meaningful shift is coming for employers who provide meals to employees for the employer’s convenience. As part of the amendments enacted under the One Big Beautiful Bill Act (OBBBA), the longstanding deduction for these meals will be eliminated starting with tax years beginning after December 31, 2025.

If your organization regularly offers on-site meals, food allowances, or catered options intended to support workflow or workplace efficiency, now is the time to take note.

What’s Changing?

For many years, employers were permitted to deduct 50% of the cost of meals provided for the employer’s convenience, such as meals offered during peak workloads or when employees were required to stay on premises.

Beginning in 2026, those same expenses will become 100% nondeductible, unless a very narrow exception applies. Importantly:

• The nondeductibility applies whether meals are provided directly by the employer or purchased through a third-party vendor or caterer.
• The rule change represents a complete phase-out of the prior 50% deduction, making it essential to evaluate how your organization categorizes and tracks all food-related expenses.

What Remains Deductible?

While convenience meals are losing deductibility, several related expense categories are not affected:

Still Deductible

• Business meeting meals: 50% deductible
• Employee holiday parties and similar social events: 100% deductible

Still Nondeductible

• Entertainment expenses remain fully nondeductible, as under existing law.

These distinctions make proper expense classification more important than ever.

What Employers Should Do Now

As 2026 approaches, businesses should begin reviewing their existing accounting and record-keeping practices. Misclassification of meals, entertainment, or employee events could lead to lost deductions or compliance concerns once these new rules take effect.

We recommend:

• Reviewing how meal and food-related expenses are currently logged
• Ensuring clear separation between meeting meals, social events, entertainment costs, and employer-convenience meals
• Updating internal policies to reflect what will and will not be deductible in future years

If your business needs guidance on preparing for this change or evaluating the potential tax impact, our team is here to help. Please reach out with your questions or to schedule a review.

Pennsylvania’s 2025–26 state budget was signed into law on November 12, 2025. With it comes a series of tax, regulatory, and workforce changes that will directly affect businesses heading into the new year.

The budget includes several tax provisions that will influence corporate planning, investment decisions, and compliance.

Corporate Net Income Tax (CNI) Phase-Down Continues

Pennsylvania will stay on track with the planned Corporate Net Income Tax reductions, moving from 7.99% today to 7.49% in 2026. The broader phase-down, from 9.99% to 4.99%, remains scheduled to continue through 2031. For businesses, this provides continued predictability and long-term planning stability.

Net Operating Loss (NOL) Improvements Maintained

The more favorable NOL rules enacted last year remain in place. Losses incurred after January 1, 2025, may offset up to 80% of tax liability by 2029 (up from the old 40% cap). Pre-2025 NOLs remain capped at 40%. This is especially helpful for capital-intensive industries, early-stage companies, and businesses with irregular revenue cycles.

Pennsylvania Decouples from Several Federal Tax Provisions

Pennsylvania will not follow these recent federal changes:

• Immediate expensing of R&D costs
• Immediate expensing of certain production property
• Expanded interest expense deductions that factor in depreciation and amortization

For state tax purposes, companies must continue to amortize R&E costs over five years and follow older depreciation and interest-deduction rules.

Workforce-Related Tax Credits and Programs

The budget introduces several measures that may influence hiring and retention.

• Working Pennsylvania Tax Credit: A new state credit equal to 10% of the federal Earned Income Tax Credit will help lower-income workers and may encourage workforce participation.
• Child Care Worker Retention & Recruitment: The state is allocating $25 million to support child care workforce stability, an important move for employers struggling with childcare-driven absenteeism.
• New Affordable Housing Tax Credit: A new $10 million tax credit will be administered by the Pennsylvania Housing Finance Agency to encourage affordable housing development.

Business Implications of Education Funding

These changes may not impact tax planning directly, but they do influence long-term workforce development:

• $872 million in new K–12 public education funding
• Large increases in early literacy initiatives
• Increased tax credit funding for private-school scholarships
• No new spending for Career & Technical Education (CTE), though some hiring flexibility has been added for CTE leaders
• Targeted increases for certain higher-education institutions

What This Means for Your Business

The 2025–26 budget creates a mixed environment for Pennsylvania employers:

Positive Takeaways

• Continued CNI tax rate reductions
• Improved NOL flexibility
• Faster, more transparent permitting
• Reduced carbon-policy uncertainty with RGGI withdrawal
• New workforce-focused tax credits

Areas Requiring Attention

• Divergence from federal rules increases tax-filing complexity
• R&E expensing limitations may affect cash planning
• One-time revenue transfers raise questions about long-term fiscal stability
• Lack of increased CTE funding may continue talent shortages

How Canon Capital Can Help

Tax law changes, especially those that differ from federal rules, require careful planning. If you have questions about how the 2025–26 state budget may impact your company, we’re here to help. Call us today at 215-723-4881 or contact us online.

As you plan year-end appreciation for your team, remember that the IRS still distinguishes between taxable and non-taxable gifts.

• Gift cards remain taxable income, no matter the amount.
• De minimis gifts–the small, infrequent, low-value items like a mug or snack box–are generally non-taxable, as long as they aren’t cash or cash equivalents.
• Bonuses continue to be fully taxable wages and must be processed with appropriate withholding.
• Holiday parties and employee celebrations are typically non-taxable when held occasionally and primarily for staff.

As you plan ways to celebrate your team, our tax and accounting professionals can help you navigate the IRS guidelines and make informed choices that show appreciation without creating unexpected tax issues.

Secure Act 2.0 became law at the end of 2022, and it continues to reshape how retirement plans work. The overall intent is positive, to help more people actually save enough for retirement, but the changes aren’t landing all at once. Different pieces phase in over several years, which means employers need to keep one eye on what’s active now and another on what is coming next.

One of those “coming next” rules is going to matter quite a bit for employers with higher-earning employees over age 50. Beginning January 1, 2026, certain catch-up contributions can no longer be made pre-tax. Those dollars must be Roth (after-tax). It’s a single rule change but the ripple effect touches payroll, plan elections, communication to employees, and how recordkeepers and payroll systems exchange data.

Who Does This Apply To?

This Roth-only requirement will apply to employees who:

• are age 50 or older
• made more than $145,000 in FICA wages in the prior year (the wage number will adjust over time)

It covers 401(k), 403(b), and governmental 457(b) plans where catch-up contributions already exist.

And What If Someone Makes Less Than $145,000?

In that case, nothing changes for them. If the plan allows it, those employees can continue to choose between pre-tax catch-up contributions or Roth catch-up contributions.

Why Employers Need to Start Looking at This Soon

Even though 2026 sounds comfortably far away, this is a change that will require coordination, updates, and testing. It’s not a “flip a switch and it’s done” type of change.

Some things that will need review:

• does your plan document even allow Roth catch-up contributions today?
• have you talked with your recordkeeper about timing for updates?
• how will payroll identify which employees cross the wage threshold each year?
• what does employee education need to look like so this isn’t confusing or disruptive?

If Roth catch-up contributions are not currently permitted under your plan and you do have employees who qualify, you’ll want to start the plan amendment conversation early.

Why This Change Isn’t Just Payroll or Just Compliance

This rule hits three worlds at once.

• The CPA side helps interpret the change and confirms the plan stays compliant.
• Payroll is responsible for coding these contributions the right way and tracking who is subject to the Roth rule each year.
• Technologies makes sure the data flow between systems is accurate, secure, and functioning the way it needs to.

This is where having those three functions working together matters more than ever, especially for small and mid-sized businesses who outsource these disciplines by design.

Don’t Wait to Scramble

Regulatory updates are always easier to manage when you give yourself time, especially when the change affects plan administration, payroll setup, and employee behavior all at once.

We’re Here to Help You Prepare

Our CPA, Payroll, and Technologies teams work together every day to help businesses stay ahead of changes just like this. If you’d like help making a plan for the 2026 Roth catch-up requirement or want to make sure your systems are ready, we’d be happy to talk through next steps with you.

Running a business means juggling dozens of moving parts, from payroll and taxes to technology and client relationships. For many small and mid-sized businesses, partnering with outside professionals for accounting, payroll, and IT support helps keep operations efficient and compliant.

At Canon Capital, we work with business owners across the Delaware Valley who are doing it all, and we’ve noticed a few small actions that make a big difference in how smoothly things run. Here are three simple ways to get even more value from your CPA, Payroll, and Technologies teams.

Payroll: Keep Us in the Loop When People (and Pay) Change

Hiring a new team member? Someone leaving the company? Giving a raise or changing a pay structure? Letting your payroll provider know right away ensures accurate paychecks and compliance with both federal and local tax requirements.

Each municipality in Pennsylvania can have different local earned income tax rates, and reporting changes promptly helps avoid under- or over-withholding. It also makes sure that your quarterly filings and year-end W-2s are accurate, saving time and future frustration.

A quick email or message when staffing changes occur allows your payroll specialists to:

• Update employee tax profiles and direct deposit info
• Verify start or end dates for pay periods
• Adjust benefit and deduction settings

It’s a small step that can prevent big headaches and help keep your team happy and paid correctly.

CPA: Call Before You Make a Big Financial Move

One of the best ways to maximize your CPA relationship is to make it proactive, not reactive. We love to hear from clients before they make a major financial decision, like purchasing new equipment, changing business structures, or expanding to a new location.

Why? Because those moves often carry tax implications that can be managed strategically with advance planning. When you loop in your CPA early, we can help you:

• Determine the most tax-efficient timing for purchases or deductions
• Evaluate whether a lease or buy makes better sense
• Review cash flow and financing impacts
• Ensure your business structure still aligns with your growth plans

A short phone call today can mean smoother filings and potentially thousands in tax savings tomorrow. Think of your CPA as part of your strategic team, not just the person who prepares your returns.

Technologies: Send a Better Ticket for Faster Fixes

We know IT issues can slow everything down. The fastest way to get back up and running is to give your tech team the right details up front.

When submitting a support ticket, include:

• What happened and when. (“Outlook froze at 9:15 a.m. after sending an email with an attachment.”)
• Any error messages or screenshots. These help pinpoint the issue immediately.
• Steps you’ve already tried. Did you restart your computer? Disconnect from Wi-Fi? Mention it.

This level of detail helps the Technologies team quickly recreate the issue, find the root cause, and deliver a faster solution. The result? Less downtime, fewer back-and-forth emails, and more time focused on your work.

Bringing It All Together

At Canon Capital, our CPA, Payroll, and Technologies teams work toward making sure your business runs efficiently from every angle. A little proactive communication helps us help you faster.

If you’re ready to partner with a team that values efficiency, accuracy, and your long-term success, we’d love to talk.

Contact us today to see how Canon Capital can make your business operations simpler and stronger.